Trade of the Day: DirecTV Group (DTV)

by Jon Markman | February 13, 2014 10:24 am

After the stock market close on Tuesday, the House passed a bill to extend the debt ceiling through March 2015, without any accompanying conditions. The vote was 221-201, with 28 Republicans supporting the measure. The need for a clean measure came after Republicans failed to reach a consensus on concessions and the White House repeatedly refused to be drawn into negotiations.

The news was pretty much a non-event for the market for once. When it comes to Washington, the best news for the market may be the dampened fiscal drag in 2014, i.e. fewer budget cuts and thus spending stays even. No wonder the Pentagon contractors’ stocks[1] have remained so firm.

I don’t have any active stock market recommendations in that space at the moment, but one name I am bullish on is DirecTV Group (DTV[2]), which is a $37.3 billion provider of digital television entertainment, primarily via satellite transmissions.

It has a big stake in the growth of sports programming as well, with exclusive rights to broadcast every NFL game in a program called NFL Sunday Ticket, which was especially profitable in the past year. It also owns and runs regional sports programming networks under the brand name Root Sports in Denver, Seattle and Pittsburgh.

Shares pulled back in the second half of January but are rising now from RS-14 oversold levels and are on their way back to the top of their Keltner channel during a time of year that tends to be favorable. Buy DTV stock up to $70.95. If filled, sell half the position at my initial target of $74.60 and I’ll be sure to update you with a final target in my next Trade of the Day.

The company is due to report earnings on Feb. 20, which is next Thursday.

And I would note that as earnings season winds down for the stock market, FactSet reports that with 74% of big companies having reported for Q4, the blended S&P 500 EPS growth rate now stands at 8.3%. This is up slightly from the 8.1% seen at the end of last week and the 6% growth expected at the start of earnings season. It is also above the 3.8% four-quarter trailing average.

Of the 368 companies in the benchmark index that have reported, 73% have beat consensus EPS expectations, just ahead of the 71% four-quarter average. 67% have beat consensus revenue expectations, nicely ahead of the 55% four-quarter average. That bodes well for DTV; its estimates have stayed steady but it has a history of reporting positive surprises.